Dear respected Jerry 16,
Good day! Thank you for posting to Microsoft Community. We are happy to help you.
I’m sorry you’re having a problem but based on your description we can work together to resolve it.
For the situation you encountered, we deeply understand the inconvenience caused and apologize for it.
As per your description, based on my test, it seems that I can also meet the same behaviour as like you described above. When choose "Folder" option we will get error message in SharePoint Stream web part. However, there is no issue when choose "Videos on this site," "Playlist," or "Single video" as the source in SharePoint Stream web part.
Firstly, please allow me to explain. The choose "Folder" option only work when you save video inside the "document library" via created by classic experience( not a general document library).
Based on my test, please follow my below steps.
1.Create a library(video library) via go to SharePoint online site content>Select Settings >Add an App>click on in the classic experience.
2.Select document library to create:
3.You will see created document library under site contents:
4.Access the document library and upload a video.
5.Then go to your SharePoint online Stream web part>select the document library>choose Folder and video will appear.
Please understand that our initial reply may not always immediately resolve the issue. However, with your help and more detailed information, we can work together to find a solution.
I'm sorry and I apologize for that.
Appreciate your patience and understanding and thank you for your time and cooperation.
Sincerely,
Waqas Muhammad